Categories

ObamaCare Explained: Karl Denninger

Analyst/trader Karl Denninger says Obama Care is doomed to failure because of pre-existing conditions of many signing up for coverage. Denninger explains, “If you are an insurance company and you only sell insurance to those who have already lit their house on fire, you’re not going to be in business very long. You have to have people who buy insurance who are not likely to have fires.”

That’s a link to the unsubsidized data dump — all 78,437 records — for each county and State under the Obamacare exchange program. I can verify that for at least my state and county the table is correct, since you can now look it up on Healthcare.gov without creating an account first (which I am not about to do.)

There are several very interesting statistical facts that come from this.

First, if you’re “27”, the average premium is $266.20/month or $3,194.40 per year. How many 27 year olds have an extra $3,200 to spend on this? Remember, this is the price that virtually every uninsured 27 year old must be willing — and able — to cough up in order to prevent the model this system is predicated on from collapsing.

If those 27 year olds don’t show up, and they won’t, then the system collapses instantly. If they do show up because the government threatens them with fines the economy collapses as $3,200 a year exceeds the average 27 year old’s disposable personal income after mandatory expenses (e.g. food, shelter, etc.) Remember, there are always exceptions but these premiums are averages and over large pools of people the statistical averages are what matters — not the ends of the barbell.

It gets better. The “average” 50 year old premium, again, for single coverage, is $452.87, or $5,434.44/year. How many 50 year olds will find that attractive compared against what they’re paying now? Probably more of them, especially if they’re already sick. But how about the healthy ones?

Note two things as well on this account — these premiums are for non-smokers (smoker premiums are grossly surcharged with reports being 1.5x the above) and they do not account for anyone other than one person. If you are a single parent with kids (rather common) the premium on average is $610.23/month or about $7,300, and if you’re a couple it’s $647.86 (again, $7,774 annually.)

Now let’s look at the government’s own claims. First, the CPI index claims that health insurance is 0.656% of the family budget. What percentage of couples make $1.185 million a year? Why do I ask? Because that’s the alleged median income for a couple if you believe the government’s CPI numbers.

Yeah, right.

Next, while some people will get “tax credits” to offset these costs all that does is lard it up on the federal budget, because someone else has to pay that bill. In other words this is the true cost that will come out of your hide one way or another — either directly by paying, indirectly by taxation, or indirectly by destruction of your purchasing power.

Next, note that this is the “50 year old” premium but you have to be 65 to qualify for Medicare. The price will rise each year after 50 that you happen to be and there are already reports that if you’re 59 these premiums are understated by half. How many couples who are 59 and cannot qualify for Medicare yet have not $7,700 a year of extra money laying around but north of $15,000?

That’s what I thought.

Are there people for whom these are “good deals”? Oh sure, if you’re fat, sick and nearly dead they’re great deals. The person with HIV who is guaranteed to suck out $30,000 or more in treatment costs each and every year has to be ecstatic at the premise that they can pay $3,200 and get back 10x what they spend on an indefinite forward basis, forever, or at least as long as the drug cocktails they’re taking let them live. Likewise someone with other diseases such as diabetes or cancer have to love these plans; they pay an effective nothing compared to what will be spent immediately and permanently (as long as they live) on them.

But for virtually everyone else these “plans” are nothing more than financial rape. Not only are the premiums outrageous for most but the limits on coverage, including deductibles, co-pays and out-of-pocket maximums means that if you get sick the so-called “price” is half or less of what you will actually spend, and this assumes you can find a doctor.

Oh, yeah, about that — most of these plans absolutely exclude payment of anything to out-of-network physicians and facilities. “You can keep your doctor” eh? Uh, no.

But before you start screaming about all this let’s back up and look at the figures, because while $30 billion sounds like a lot it’s actually not. Nor are “medical torts”; by some figures costing $20 billion a year (although dropping.)

Let’s add into this so-called “uncompensated care” — that is, the result of EMTALA and other similar laws that “force” hospitals to “eat” the cost of care for those who have neither insurance or money. This has been rising very rapidly (by some 400% in the last couple of decades) and currently stands at some $40 billion.

These are big numbers, right?

Well, not really. Between the statins, torts and formal cost-shifting the total is $100 billion.

The problem is that the cost of “sick care” is in fact more than $2,700 billion a year in the economy as a whole and of that half comes from federal and state budgets and is drowning our nation in debt.

In other words if we reduced to zero all cost shifting, we got rid of all statin drug sales in the entire category (or made them “free” by force) and in addition Obamacare completely eliminated everyone who had neither insurance or money, and thus got rid of the entire uncompensated care problem we’d save a whopping……

wait for it….

3.7% of what we spend on health care annually.

In other words it wouldn’t make any difference at all.

You have been told and sold otherwise by both the left (in the case of Obamacare) and right (in the case of uncompensated care and tort reform) and both sides of the aisle have knowingly lied and committed fraud against you to the tune of nearly $3 trillion dollars, or 17% of every dollar spent in the economy last year.

If you caught someone stealing that sort of money from you in the middle of the night in your house you’d shoot them, and with good cause. So why haven’t we politically shot these jackasses and then indicted and locked them up on fraud charges?

More to the point, why aren’t there a few million*****ed-off Americans in Washington DC right now who are surrounding the Capitol and refusing to leave until the lies stop and the scam is excised from our economy?

Probably because nobody, other than a few such as myself, have put these numbers before you and I’m willing to bet that not one in 100 of the people who read this were aware that all three of the above factors combined, were they to be completely eliminated from the health system, would shave off less than four percent of the problem.

But now you don’t have that excuse because here it is in black-letter facts and figures.

So where’s all the money going when we used to spend less than 1/3rd of this much in the 1970s (as a percentage of GDP) on health care, and why is it so damned expensive that you need “forced insurance”?

That’s simple: The entire health system is an organized racketeering outfit that has gotten laws passed to make their conduct legal — conduct that in virtually any other field would be an outright criminal felony.

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court.

The industry doesn’t even try to hide their conduct. Indeed, there are even specific laws in many states, called “Certificate Of Need” (or “CON”) laws, that are formalization of cartel behavior otherwise prohibited by The Sherman Act. This leads to utterly common situations where the price for a given procedure usually varies by as much as 400% from one hospital in a region to another and in many cases varies by more than 1,000%, and it is virtually impossible for you to determine the price before you are treated.

How else do you get a situation like the Phoenix woman who was billed more than $60,000 for two vials of scorpion antivenom that sell for $100 each in Mexico where they’re made over the counter in a pharmacy, not far from Phoenix. If you get into your car and fill the trunk with said drug you are breaking the law as soon as you cross back into the United States (and if caught will be jailed.)

You want to fix the problems with Health Care in this country and solve Federal, State and local budget problems all at once? Break up all the monopolies by declaring unlawful all such conduct that restrains trade or fixes prices and void those laws that have made this behavior legal, mandate public disclosure and level billing of procedures, drugs and devices to all persons and prosecute and imprison violators — all of them, starting with every single one of the health insurance, pharmaceutical and big “managed care” executives.

The cost of health care in this country would crash by 80% overnight and with a price 1/5th of what is paid now nobody would need health “insurance”, save for catastrophic coverage that would cost less than you currently pay for insurance on your home or apartment contents and which you could choose to either buy or take the risk that such a catastrophe would strike and you would either have to cough up the money or die.

In addition putting a stop to this scam would immediately and permanently fix the Federal Budget without cutting one nickel of discretionary spending and it would not require gutting Medicare either. Only very minor changes to Social Security (indexing full retirement to longevity) would be required to bring permanent budget stability and in fact we would run, right here, now and today, a budget surplus.

Wake up America before you’re strangled and expire economically as a direct consequence of this three-decades-long scam.